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Two largest Israeli banks turn in higher quarterly profit

May 25, 2014

Israel’s two biggest lenders – Bank Hapoalim and Bank Leumi – yesterday reported big increases in net profit in the first quarter, while their smaller rivals saw earnings weighed down by a strike at First International Bank of Israel (FIBI).

Hapoalim, Israel’s largest lender, posted a quarterly net profit of 753 million shekels ($215.6 million) – up more than 21% from 621 million shekels a year earlier – on increased income from fees and a gain in its provision for credit losses.

Net financing income was little changed at 2.056 billion shekels, from 2.057 billion, while it had a gain in its provision for credit losses of 15 million shekels, compared with a charge of 257 million shekels. Fees and other income increased to 1.299 billion shekels, from 1.287 billion shekels.

Hapoalim’s core Tier 1 capital ratio to risk-weighted assets was 9.44% according to Basel III, up from 9.15% on January 1.

Shares of Hapoalim, which had been forecast to report a profit of 638 million shekels in a Reuters poll of analysts, closed 0.5% up at 20.22 shekels in Tel Aviv Stock Exchange trading. The bank said its board approved a dividend of 106 million shekels for the quarter, unchanged from the fourth quarter.

No. 2 Bank Leumi, meanwhile, reported a 10% increase in quarterly profit to 625 million shekels, up from 570 million shekels a year earlier.

It posted income in respect to credit losses of 51 million shekels, compared with an expense of 73 million shekels in the first three months of 2013. Net interest income slipped 0.3% to 1.76 billion shekels. The bank recorded a gain of 70 million shekels from the sale of Partner Communications shares, versus a gain of 180 million shekels the prior year.

Leumi shares edged up 0.07% in Tel Aviv to a close to 13.81 shekels. The bank had been forecast to earn 514 million shekels, including a credit-loss expense of 114 million, according to a Reuters poll of analysts.

Leumi’s ratio of Tier I capital to risk elements in Basel III terms rose to 9.41% from 9.2% at the end of 2013 – above a mandate of 9% by the start of 2015.

Israel Discount Bank suffered a 37% drop in quarterly profit, missing analysts’ estimates as it was hit by a one-time provision, lower interest income and a decline in the value of its holdings in FIBI.

Israel’s third-largest lender, Discount said it earned 165 million shekels in the three months, compared with 263 million shekels a year earlier and expectations of 185 million shekels in a Reuters poll of analysts.

Discount shares closed 3% lower in TASE trading to 6.04 shekels. CEO Lilach Asher-Topilsky said the bank’s main challenge was to restrain its costs and improve its cost-income ratio, which will be a focus of a new strategic plan to be presented at the end of August.

Net interest income slipped 2.5% to 1.02 billion shekels, while its credit loss expense dropped 48% to 75 million shekels to reflect an improvement in its credit quality.

No. 5 FIBI, meanwhile, reported a drop in quarterly profit to 120 million shekels from 136 million shekels a year earlier.

Net interest and non-interest financing income fell 6.8% to 578 million shekels, while the bank recorded a credit loss expense of 10 million shekels, compared with 32 million shekels a year ago.

“The low interest environment, the negative CPI and accounting effects have temporarily offset the impact of the growth in volumes of activity,” said CEO Smadar Barber-Tsadik.